The number did not increase, but further optimism came from comments made by several Chinese agencies about a possible relaxation of zero-Covid rules, and then came the mid-April publication by the Chinese Center for Disease Control and Prevention (CCDC). ) guide that described home quarantine measures. These would have alleviated the economically crippling impact of people having to be quarantined in central government facilities, even if suffering from very mild symptoms or none, after testing positive for Covid-19. Those hopes again, however, were dashed as, when asked for further clarification of these home quarantine procedures, the CCDC simply restated the previous rules. China’s President Xi Jinping then personally reiterated that: “We must adhere to scientific accuracy, to potential zero Covid…Persistence is victory.” As it stands, China still does not have an effective vaccine against Covid-19, nor an effective post-infection antiviral, and still refuses to buy such supplies from non-domestic suppliers, despite repeated offers from all major producing countries to to dispose of these supplies. Even before the extension of the lockdown in Chengdu which has added another 21 million people to the total, 44 million people in China were already under lockdown.
Just over a week ago, the People’s Bank of China (PBOC) stepped in to try to ease the negative economic pressures building up in several sectors, with continued reductions in its various policy rates. Having surprised the market with a 10 basis point (bps) cut in the 1-year Medium Term Lending Facility (1 year MLF) and the 7-day resale rate (7d RRP), the PBOC doubled down with a deeper cut (15 bps to 4.30 percent ). ) at the 5-year Loan Prime Rate (5y LPR), SEB’s Victorino pointed out. “The deeper cuts in the 5-year LPR reflect policymakers’ intent to stabilize the real estate sector and the adjustment will further weigh on average mortgage rates, given that minimum mortgage rates are set at 20 bps below the 5-year LPR” , he said. “However, even before the latest rate cuts, economic conditions have been easing for months, with the PBOC guiding interbank funding lower through liquidity injections. [but] Although lower borrowing costs are designed to support demand for credit, liquidity conditions have yet to put a dent in onshore confidence,” he added. Of particular concern, in terms of the broader economic turmoil in China, is the disastrous state of the real sector. “Drip-fed support for the real estate sector has yet to stop the bleeding and the crisis of confidence in the housing market continues,” Victorino told OilPrice.com. “Latest bank earnings reports have seen state-owned banks double estimates of loan defaults linked to mortgage boycotts, while China’s biggest state-owned bad asset managers reported a drop in profits due to credit impairments linked to their exposure to real estate,” he said. The likelihood of further lockdown-related shocks to oil prices in the coming weeks appears high given that the Mid-Autumn Festival holiday began on September 10 and that Golden Week (which incorporates China’s National Day) begins on the 1st October. The Chinese government has already warned people not to travel during the upcoming major holidays. By Simon Watkins for Oilprice.com More top reads from Oilprice.com:
